(Updates with Annan-Assad talks, fighting)
* Annan to meet Assad on Monday
* Clinton says rebels on the offensive, time running out
* Assad says countries supporting rebels blocking peace plan
By Erika Solomon
BEIRUT, July 9 (Reuters) - Kofi Annan was holding talks in Damascus on Monday with Syrian President Bashar al-Assad, who said U.S. political support for "terrorists" was hindering the peace envoy's plan to end 16 months of bloodshed.
Assad also accused Saudi Arabia, Qatar and Turkey of supplying the rebels trying to overthrow him with arms and other logistical support.
"We know that (Annan) is coming up against countless obstacles but his plan should not be allowed to fail, it is a very good plan," Assad told German television channel Das Erste.
"The biggest obstacle is that many countries do not even want this plan to succeed so they offer political support and continue to provide the terrorists in Syria with arms and money," Assad said, according to a transcript in German of the interview conducted in English on July 5.
Anti-Assad activists in Syria reported army shelling and clashes with rebels on Monday in Deir Ezzor, Deraa, Homs, Aleppo and a neighbourhood of Damascus. Residents also reported the sound of gunfire in the capital.
An activist website said over 100 Syrians had been killed on Sunday, most of them civilians.
Annan arrived on Sunday at the Dama Rose hotel in the Syrian capital, where U.N. observers have been staying since suspending their patrols because of an increase in the level of violence.
U.S. Secretary of State Hillary Clinton said on Sunday that Syrian opposition forces were growing more effective and the sooner the violence ended, the better the chances of sparing Syria's government a "catastrophic assault" by rebel fighters were.
While Assad has faced sanctions and international condemnation over his crackdown on dissent, major Western and Arab powers have shied away from direct military action.
Turkey has reinforced its border and scrambled fighter aircraft several times since Syria shot down a Turkish reconnaissance jet on June 22 over what Damascus said were Syrian territorial waters in the Mediterranean. Ankara said the incident occurred in international air space.
"SAND IS RUNNING OUT"
"The sooner there can be an end to the violence and a beginning of a political transition process, not only will fewer people die, but there is a chance to save the Syrian state from a catastrophic assault that would be very dangerous not only to Syria but to the region," Clinton told a Tokyo news conference.
She appeared to be referring to the possibility of Syrian rebels launching such an assault on state institutions rather than to any outside intervention.
"There is no doubt that the opposition is getting more effective in their defence of themselves and in going on the offence against the Syrian military and the Syrian government's militias. So, the future ... should be abundantly clear to those who support the Assad regime," Clinton added.
"The sand is running out of the hour glass."
Syria's navy fired live missiles from ships and helicopters over the weekend, in an exercise aimed at demonstrating its ability to "defend Syria's shores against any possible aggression", state media said.
Rami Abdelrahman, head of the Syrian Observatory for Human Rights, said residents of al-Sharifa in the wider Deir al-Zor province on Sunday reported that rebels had taken over a tank for the first time and were using it to attack army positions.
The rebels have gained confidence in recent weeks, staging bolder attacks, holding pockets of territory across the country and clashing with troops only a few miles from the presidential palace in Damascus.
(Additional reporting by Marwan Makdessi in Damascus and Arshad Mohammed in Tokyo; Editing by Andrew Osborn)